NEW YORK -- A takeover of CBS Inc. by cable television entrepreneur Ted Turner would plunge the network into heavy debt and shrink diversity in national news programming, CBS charged in a petition to the Federal Communications Commission.
CBS, which filed the petition Monday, was joined by many of its 208 affiliated stations and other groups, including Action for Children's Television and United Church of Christ, in urging the FCC to block Turner's $5.4 billion hostile takeover bid.
The CBS petition was in response to Turner's application with the FCC asking for a transfer of broadcasting licenses. Turner now has a chance to respond to the CBS petition and the network has an opportunity to answer before the FCA makes a decision.
The network's petition said Atlanta-based Turner Broadcasting System is not financially qualified to take control of the company and charged Turner 'would transform CBS from a stable and well-financed institution ... to a debt-laden company.'
His offer for the network, CBS said, is based on high-risk 'junk bond' financing. Because no cash would be involved in Turner's proposal, $4.5 billion of debt would be added to CBS' books if his proposed offer succeeded.
The interest expense from Turner's highly leveraged proposal would 'bankrupt CBS and send it into a death spiral,' CBS Senior Vice President William Lilley III told The Washington Post.
The petition also said the combination of the two companies would lessen the competition for national advertising as well as create a loss of diversity in natonal news programming and in the Atlanta market, where CBS has an affiliate.
Joe Carriere, CBS affiliates chairman, told the Post that more than half of the affiliated stations filed petitions urging the FCC to block the Turner bid.
The newspaper said Action for Children's Television and United Church of Christ also urged the FCC to thwart the takeover attempt because a merger of CBS and Turner Broadcasting System would reduce diversity in news programming.
'The basic argument is the lack of finances Turner would bring to the situation,' Carriere told the Post. 'With that lack of finances would come a decline in the amount and quality of public interest programming.
'He (Turner) is already competing in the news area. I wonder if we really need to lose that fourth service, since it is the only major television news source besides the networks.'
Before a formal offer for CBS can be initiated, Turner Broadcasting must await clearance from the Securities and Exchange Commission as well as approval from the FCC for the transfer of license. That procedure could take months.
Turner's offer has not changed substantially since it was first made in April.
Analysts have estimated that the bid is worth somewhere between $150 and $165 a share.
'I think the chances that Ted Turner will win are pretty small,' said Edward Atorino, an analyst at Smith Barney, Harris Upham. 'CBS has enough time to devise any one of several strategies. CBS is still largely in its own hands.'